Bonds: Italy still above 7%

Date: Monday 09 Jan 2012

The yield on Italian 10 year bonds remained above 7% through Monday, a level which many observers see as unsustainable over the medium term.

These were the interest rates and movements on some of the most watched countries’ benchmark 10 year bonds.

Italy 7.16% (+3bp)
Spain 5.56% (-14.6bp)
France 3.31% (+5bp)
UK 2.01% (-1bp)
Germany 1.85% (-1bp)
US 1.92% (-4bp)

Concerns over Italy’s solvency have become acute as the country’s biggest bank saw yet another dramatic fall in its share price. Unicredit fell 13% in Milan after a disastrous rights issue last week spooked investors.

In other news, German bonds raised eyebrows as the country sold six month notes at a negative yield for the first time. Europe’s biggest economy sold €3.9bn at an average yield of minus 0.0122%.

Commentators have suggested this is an indication of anxiety in the market, where losing a small amount on a loan to Germany is seen as preferable to losing significant amounts in loans to Italy or Spain.

The European Central Bank also announced banks deposited a record €463.6bn in its overnight facility on January 6 in yet another sign of tension in the single currency area.

BS

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